World Competitiveness Yearbook 2008
Poor economic policies result in declining Hungarian competitiveness
Rankings of the World Competitiveness Yearbook ország 2008 (2007) USA 1. (1.) Singapore 2. (2.) Hong Kong 3. (3.) Switzerland 4. (6.) Luxembourg 5. (4.) Denmark 6. (5.) Australia 7. (12.) Canada 8. (10.) Sweden 9. (9.) Netherlands 10. (8.) ... Estonia 23. (22.) Czech Republic 28. (32.) Slovakia 30. (34.) Hungary 38. (35.) Poland 44. (52.) Romania 45. (44.)
Hungary slid to 38th place from 55 countries in the 2008 competitiveness ranking of the IMD World Competitiveness Yearbook.
Hungary’s competitiveness continues to deteriorate, mostly due to persistently bad economic policies. This is the main conclusion drawn from the IMD World Competitiveness Yearbook 2008, which compares the competitiveness of 55 nations based on statistical data and executive opinion surveys. Hungary lost three places since last year and lost ground in all competitiveness factors: economic performance, government and business efficiency and infrastructure.
According to the Yearbook’s figures the problems stem from years of economic mismanagement. Persistently loose fiscal policy necessitated stabilisation which has held back economic growth and drove up inflation. In 2007 Hungary had the largest budget deficit, the slowest GDP growth rate and the seventh fastest inflation of the 55 countries. The wasteful welfare system that does not encourage employment soaks up revenues: the effective personal income tax rate is the biggest while social security contributions are also among the highest among the surveyed countries. It is not surprising that Hungary ranks only 47th by its employment rate.
Even the policy outlook is bleak. Hungary is one of the least politically stable countries according to the Yearbook. The willingness for much-needed reforms has dissipated from the government and the society. The direction of economic policy is inconsistent and the implementation of government decisions is inadequate. The population is becoming disillusioned. Hungarians are more against competition and globalisation than any other nation while they are also among the least flexible and adaptable societies. Their knowledge of economic matters is also deemed inadequate, therefore the popular pressure for more responsible policies is lacking.
The Yearbook also notes some positive developments. The external balance of the economy is improving; executives’ opinion of the central bank’s performance is becoming more favourable; computer and internet use are spreading. Business regulation and basic infrastructure are still evaluated positively. Still, the gap between Hungary and global and regional leaders is widening. The most competitive economy of the world remains the U.S. while the European front-runner is Switzerland. Among new EU members Estonia preserved its pole position. Key global competitiveness challenges are related to the weakness of the U.S. economy and housing market, the credit crisis and price developments of resources. For Hungary the most important task is to continue fiscal stabilisation by cutting public expenditures. This should be followed by encouraging employment, mitigating the distorting effects of the tax system, cutting red tape and improving the quality of legislation and effectively utilising EU funds.
2008 rankings of the World Competitiveness Yearbook »
Country profile of Hungary»
Website of IMD »
For more information please contact Mr. Gábor Pellényi (phone: +36 1 248 1160 / 108).